Designing choice architectures

Opinion

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A recent policy measure made use of by governments is the idea of ‘nudging’ people to adopt a certain course of action. This is a concept that is the subject of a seminal book titled ‘Nudge’ co-authored by Richard Thaler and Cass Sunstein. Thaler is an economics professor at the University of Chicago and Sunstein is a law professor at Harvard University. Their contention is that human behaviour is amenable to influence or ‘nudging’ using the right ‘choice architecture’ – the manner in which choices are presented to people who have to make a decision about a course of action. Their approach eschews mandatory restrictions on people’s freedom to act and sidesteps traditional policies such as taxes, subsidies and regulation by the state.

The ‘nudge theory’ departs from the usual assumption made in economics textbooks that people are rational decision makers and that their decisions are reasonable, consistent and planned. Using research from behavioural psychology, the proponents of the nudge theory point out that actual decision-making is subject to ‘cognitive biases’ or mental errors. To put it plainly, people are not automatons using a computer chip to process massive amounts of raw data so as to weigh the pros and cons of different courses of action and come up with an optimal decision. Instead, their thought patterns get warped by various factors such as unpredictable mood swings and by their egos, habits and impulses.

An often cited statistic showing how nudges can be effective is the rate of organ donations from those who meet with a fatal accident on the road. In countries where the default option on a driver’s licence application form is a willingness to donate in case of accidental death, the organ donation rate is at least twice as high compared to countries where the applicants themselves have to check a box indicating their willingness to donate. In other words, when people have to opt out, the willingness to be a donor spikes up compared to when people are asked to opt in.

The UK government was so convinced of the practicality of the concept that former prime minister David Cameron set up the ‘Behavioural Insights Team’ in 2010 popularly known as the ‘Nudge Unit’. The Nudge Unit has had a string of successes in various areas including tax compliance. One such project involved sending reminder letters to tax delinquents with different messages. One letter informed non-payers that most people in their community had paid their taxes. Another message said that most people who owed the same amount of taxes had already paid. The result was an additional tax revenue of 210 million pound sterling for the UK tax authorities.

Nudging has caught on in many fields, including education. Recently a research study conducted by the Education Endowment Foundation, an independent UK-based charity promoting better educational outcomes, found that increasing parental engagement in children’s education by sending SMS texts on cell phones to parents about upcoming tests or homework deadlines was beneficial. It helped boost secondary school pupils’ mathematics learning by an equivalent of one extra month in the classroom. Absenteeism was also reduced. This was done through the simple and low-cost expedient of messaging parents weekly during the school year either about dates of upcoming tests, cautioning them about children’s missed homework or describing informally what had been taught at school earlier that day.

The possibility that nudging can lead to higher business profitability has not escaped the notice of the private sector. A Dutch company that was losing business because many customers were returning the electric bikes they had ordered on account of poor handling that had damaged the product during delivery came up with an ingenious solution – it printed a picture of a flat screen television on the side of the box containing the bike. That resulted in a decline in the number of damaged bikes by over 70 percent. Presumably, delivery personnel are more careful while handling televisions than they are while handling bikes as the former tend to be more fragile.

Those who bemoan low voter turnout in elections can also learn from the application of behavioural science to address the issue. Public policy analysts David Nickerson and Todd Rogers conducted an experiment in 2008 in the US state of Pennsylvania in which a large group of eligible voters in a primary election received a phone call asking them whether they intended to vote. They were also vaguely encouraged to do so. Their turnout at the polling station, however, was not significantly different from those who received no such call.

On the other hand, when a second large group of prospective voters was asked about its voting intentions – when, where and how they planned on accomplishing their goal of voting, voter turnout increased by a margin of 4.1 percent compared to the group which received no such phone call. The questions directed at the second group about their voting plans nudged them into voting at a higher rate.

There are numerous other successful uses of nudge theory – promoting safer driving on roads, increasing blood donations to hospitals, encouraging healthier eating habits and improving public hygiene. For an example of the last category, consider the steps taken by authorities in Dhaka, Bangladesh to reduce the problem of public urination. Although messages in Bengali were placed in red on walls asking people not to urinate in public and instead use public toilets with an arrow pointing in the direction of the closest toilet, these were routinely ignored by the public. However, when the same message was replaced with Arabic text, instances of public urination dwindled dramatically. One can sense why in a largely Muslim country a message in Arabic succeeded in getting the desired result whereas the same message in the local language proved ineffective.

After its early success in shaping public policy, the Nudge Unit was partly privatised by the UK government in 2014. Subsequently, counterpart organisations have been set up in Australia, Singapore, Germany and the US indicating that the theory has passed the ‘proof of concept’ stage. The World Bank also took notice and established its own ‘nudge unit’ in 2015 which is called the Global Insights Initiative or GINI. The World Bank President Jim Yong Kim explained at the time of the launch of its initiative, lack of behavioural interventions had undermined the success of several poverty reduction programmes supported by the World Bank.

Of course, nudging does have limitations. The consensus is that, while nudging can be useful in changing behaviours in a modest way, government intervention or ‘shoving’ is still needed to address deep rooted psychological problems such as alcoholism, drug dependency and criminal behaviour. As one of the leading proponents of nudging said in a newspaper interview, “No one is proposing removing the law against murder and replacing it with a nudge”.

The theory has also been criticised on moral grounds for subtly interfering with people’s choices by presuming that the government knows what is best for the governed – a form of insidious paternalism that offends the sensibilities of those who believe that individual choices are sacrosanct even if these are not as conducive to a person’s well-being.

Notwithstanding its limitations, this approach does appear to work which is why it has captured the imagination of policymakers around the world. Those at the helm of decision-making in Pakistan may want to take a closer look at this concept as another possible instrument of public policy.

A recent policy measure made use of by governments is the idea of ‘nudging’ people to adopt a certain course of action. This is a concept that is the subject of a seminal book titled ‘Nudge’ co-authored by Richard Thaler and Cass Sunstein. Thaler is an economics professor at the University of Chicago and Sunstein is a law professor at Harvard University. Their contention is that human behaviour is amenable to influence or ‘nudging’ using the right ‘choice architecture’ – the manner in which choices are presented to people who have to make a decision about a course of action. Their approach eschews mandatory restrictions on people’s freedom to act and sidesteps traditional policies such as taxes, subsidies and regulation by the state.

The ‘nudge theory’ departs from the usual assumption made in economics textbooks that people are rational decision makers and that their decisions are reasonable, consistent and planned. Using research from behavioural psychology, the proponents of the nudge theory point out that actual decision-making is subject to ‘cognitive biases’ or mental errors. To put it plainly, people are not automatons using a computer chip to process massive amounts of raw data so as to weigh the pros and cons of different courses of action and come up with an optimal decision. Instead, their thought patterns get warped by various factors such as unpredictable mood swings and by their egos, habits and impulses.

An often cited statistic showing how nudges can be effective is the rate of organ donations from those who meet with a fatal accident on the road. In countries where the default option on a driver’s licence application form is a willingness to donate in case of accidental death, the organ donation rate is at least twice as high compared to countries where the applicants themselves have to check a box indicating their willingness to donate. In other words, when people have to opt out, the willingness to be a donor spikes up compared to when people are asked to opt in.

The UK government was so convinced of the practicality of the concept that former prime minister David Cameron set up the ‘Behavioural Insights Team’ in 2010 popularly known as the ‘Nudge Unit’. The Nudge Unit has had a string of successes in various areas including tax compliance. One such project involved sending reminder letters to tax delinquents with different messages. One letter informed non-payers that most people in their community had paid their taxes. Another message said that most people who owed the same amount of taxes had already paid. The result was an additional tax revenue of 210 million pound sterling for the UK tax authorities.

Nudging has caught on in many fields, including education. Recently a research study conducted by the Education Endowment Foundation, an independent UK-based charity promoting better educational outcomes, found that increasing parental engagement in children’s education by sending SMS texts on cell phones to parents about upcoming tests or homework deadlines was beneficial. It helped boost secondary school pupils’ mathematics learning by an equivalent of one extra month in the classroom. Absenteeism was also reduced. This was done through the simple and low-cost expedient of messaging parents weekly during the school year either about dates of upcoming tests, cautioning them about children’s missed homework or describing informally what had been taught at school earlier that day.

The possibility that nudging can lead to higher business profitability has not escaped the notice of the private sector. A Dutch company that was losing business because many customers were returning the electric bikes they had ordered on account of poor handling that had damaged the product during delivery came up with an ingenious solution – it printed a picture of a flat screen television on the side of the box containing the bike. That resulted in a decline in the number of damaged bikes by over 70 percent. Presumably, delivery personnel are more careful while handling televisions than they are while handling bikes as the former tend to be more fragile.

Those who bemoan low voter turnout in elections can also learn from the application of behavioural science to address the issue. Public policy analysts David Nickerson and Todd Rogers conducted an experiment in 2008 in the US state of Pennsylvania in which a large group of eligible voters in a primary election received a phone call asking them whether they intended to vote. They were also vaguely encouraged to do so. Their turnout at the polling station, however, was not significantly different from those who received no such call.

On the other hand, when a second large group of prospective voters was asked about its voting intentions – when, where and how they planned on accomplishing their goal of voting, voter turnout increased by a margin of 4.1 percent compared to the group which received no such phone call. The questions directed at the second group about their voting plans nudged them into voting at a higher rate.

There are numerous other successful uses of nudge theory – promoting safer driving on roads, increasing blood donations to hospitals, encouraging healthier eating habits and improving public hygiene. For an example of the last category, consider the steps taken by authorities in Dhaka, Bangladesh to reduce the problem of public urination. Although messages in Bengali were placed in red on walls asking people not to urinate in public and instead use public toilets with an arrow pointing in the direction of the closest toilet, these were routinely ignored by the public. However, when the same message was replaced with Arabic text, instances of public urination dwindled dramatically. One can sense why in a largely Muslim country a message in Arabic succeeded in getting the desired result whereas the same message in the local language proved ineffective.

After its early success in shaping public policy, the Nudge Unit was partly privatised by the UK government in 2014. Subsequently, counterpart organisations have been set up in Australia, Singapore, Germany and the US indicating that the theory has passed the ‘proof of concept’ stage. The World Bank also took notice and established its own ‘nudge unit’ in 2015 which is called the Global Insights Initiative or GINI. The World Bank President Jim Yong Kim explained at the time of the launch of its initiative, lack of behavioural interventions had undermined the success of several poverty reduction programmes supported by the World Bank.

Of course, nudging does have limitations. The consensus is that, while nudging can be useful in changing behaviours in a modest way, government intervention or ‘shoving’ is still needed to address deep rooted psychological problems such as alcoholism, drug dependency and criminal behaviour. As one of the leading proponents of nudging said in a newspaper interview, “No one is proposing removing the law against murder and replacing it with a nudge”.

The theory has also been criticised on moral grounds for subtly interfering with people’s choices by presuming that the government knows what is best for the governed – a form of insidious paternalism that offends the sensibilities of those who believe that individual choices are sacrosanct even if these are not as conducive to a person’s well-being.

Notwithstanding its limitations, this approach does appear to work which is why it has captured the imagination of policymakers around the world. Those at the helm of decision-making in Pakistan may want to take a closer look at this concept as another possible instrument of public policy.